A sub-strategy for the U.S. Sector strategy.

See the main US Sector strategy for a detailed asset description.

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (46.1%) in the period of the last 5 years, the total return of 60.7% of US sectors balanced is larger, thus better.
- During the last 3 years, the total return, or increase in value is 22.9%, which is lower, thus worse than the value of 23.5% from the benchmark.

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- Looking at the annual return (CAGR) of 9.9% in the last 5 years of US sectors balanced, we see it is relatively greater, thus better in comparison to the benchmark SPY (7.9%)
- Compared with SPY (7.3%) in the period of the last 3 years, the annual performance (CAGR) of 7.1% is lower, thus worse.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:- The 30 days standard deviation over 5 years of US sectors balanced is 16.1%, which is smaller, thus better compared to the benchmark SPY (18.3%) in the same period.
- During the last 3 years, the 30 days standard deviation is 18.2%, which is smaller, thus better than the value of 20.8% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:- Looking at the downside deviation of 11.3% in the last 5 years of US sectors balanced, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.4%)
- Compared with SPY (15.4%) in the period of the last 3 years, the downside risk of 12.9% is lower, thus better.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:- The ratio of return and volatility (Sharpe) over 5 years of US sectors balanced is 0.46, which is higher, thus better compared to the benchmark SPY (0.29) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.25, which is larger, thus better than the value of 0.23 from the benchmark.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:- The excess return divided by the downside deviation over 5 years of US sectors balanced is 0.66, which is larger, thus better compared to the benchmark SPY (0.4) in the same period.
- Looking at excess return divided by the downside deviation in of 0.36 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.31).

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:- Compared with the benchmark SPY (5.27 ) in the period of the last 5 years, the Ulcer Ratio of 4.12 of US sectors balanced is lower, thus better.
- During the last 3 years, the Downside risk index is 4.75 , which is lower, thus better than the value of 6.08 from the benchmark.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum drop from peak to valley of -29.2 days of US sectors balanced is greater, thus better.
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum reduction from previous high of -29.2 days is higher, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs) in days.'

Applying this definition to our asset in some examples:- Looking at the maximum days under water of 142 days in the last 5 years of US sectors balanced, we see it is relatively lower, thus better in comparison to the benchmark SPY (187 days)
- Looking at maximum days under water in of 110 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (139 days).

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Which means for our asset as example:- The average days under water over 5 years of US sectors balanced is 32 days, which is smaller, thus better compared to the benchmark SPY (42 days) in the same period.
- Compared with SPY (36 days) in the period of the last 3 years, the average time in days below previous high water mark of 32 days is smaller, thus better.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of US sectors balanced are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.